BBRY Drops 17%: Sees $950M FYQ2 Loss, Cutting 4,500 Staff

By Tiernan Ray

Shares of BlackBerry (BBRY) have been halted, pending a news announcement. The stock was down 25 cents, or 2.4%, at $10.27 just before 3 pm, Eastern time.

Briefing.com notes that there had been “chatter” throughout the day about more activity around a possible sale of the company, with a rumor that PriceWaterhouseCoopers has been retained by the firm for a leveraged buyout.

Update:The company pre-announced a pre-tax loss for the fiscal Q2 ended last month of $950 million to $955 million, on revenue of $1.6 billion, including an inventory charge of $930 million to $960 million, which it said was the result of “an increasingly competitive business environment impacting BlackBerry smartphone volumes.”

EPS will be in a range of a net loss of 47 cents to 51 cents.

Those numbers are well below the Street’s average estimate for revenue of $3.04 billion and a pre-tax loss of $143 million, and a net loss of 16 cents.

The company plans to cut 4,500 employees, and said it will slim its device portfolio to 4 models from 6 as it focuses on enterprise customers and “prosumers.” That would be about 40% to 50% of BlackBerry’s total headcount, following last year’s 5,000-person cut, and consistent with a report yesterday by Will Connors of The Wall Street Journal about possible layoffs.

Gross margin in the quarter is expected to come in at 35% to 37%, which is

BlackBerry said the cuts were intended to reduce the company’s operating expenses by as much as 50%.

Regarding M&A and partnership possibilities, the company said its “special Committee of the Board continues to evaluate strategic alternatives.”

The shares are set to resume trading at 3:35 pm, Eastern, according to Nasdaq.

Update 2: The shares have resumed trading and are down $2.03, or almost 20%, at $8.45.

Update 3: The shares closed down $1.79, or 17%, at $8.72.

Update 4:R.W. Baird’s William Powerthis afternoon writes that BlackBerry probably burned through $500 million in cash during the quarter, or about $1 per share, against what has been roughly $6 per share in cash on the books.

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There are 4 comments

SEPTEMBER 20, 2013 3:56 P.M.

Mike wrote:

Thorsten's head's gotta roll. He failed on all relevant fronts.

SEPTEMBER 20, 2013 4:11 P.M.

w00dmann wrote:

Whither freddysrvg?

SEPTEMBER 20, 2013 4:15 P.M.

Just a Hunch... wrote:

What about considering FaceBook as a potential suitor? I mean if the value drops to next to nothing. Why not? In certain ways it could make the most sense possibility wise. Otherwise. Blackberry looks fugged. No.

By the way. Re today's Blackberry announcement. What were you expecting? Hmm. Hmm. Trading at $10+ pps was goofy optimistism. Dream on.

SEPTEMBER 20, 2013 4:21 P.M.

freddysrevng wrote:

My apologies. What's wrong? I feel great. A nice daily jolt of electroshock therapy will do it. There should be a cross platform app for it! Push the home button and get zapped like a bug light...

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.